Monthly Archives: January 2014

The redistributionists, including Joseph Stiglitz, President Obama, Robert Reich, former Secretary of Labor, Paul Krugman, NY Times columnist, Bill de Blasio, the new Mayor of NYC, and others seem to have only a passing flirtation with the free market. They appear much more inclined, on purpose or not, to want to promote class warfare.

One of their main thrusts is in the area of poverty, where they spout things like, “In America, nearly one in four children live in poverty.”

So let’s look at some facts:

According to the Census Bureau, the poverty line for a family of four in 2012 was $23,000 of annual income. That did not include the value of housing subsidies, food stamps, welfare, health and medical aid, and educational assistance and meals, which would probably double that income figure. Still not much money for a family of four.

Understanding poverty in America requires looking behind these numbers at the actual living conditions of the individuals the government deems to be poor. For most Americans, the word “poverty” suggests near destitution: an inability to provide nutritious food, clothing, and reasonable shelter for one’s family. However, only a small number of the approximately 50 million classified as “poor” by the Census Bureau fit that description. While real material hardship certainly does exist, it is limited in scope and severity.

The following facts about people defined as “poor” by the Census Bureau are taken from various government reports:

80 percent of poor households have air conditioning

92 percent of poor households have a microwave

Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks

Nearly two-thirds have cable or satellite TV

Two-thirds have at least one DVD player, and 70 percent have a VCR

Half have a personal computer, and one in seven have two or more computers

More than half of poor families with children have a video game system, such as an Xbox or PlayStation

43 percent have Internet access

One-third have a wide-screen plasma or LCD TV

One-fourth have a digital video recorder system, such as a TiVo

Is this the poor or the middle class?

Most of the poor do not experience hunger or food shortages. The U.S. Department of Agriculture collects data on these topics in its household food security survey. For 2009, the survey showed:

Ninety-six percent of poor parents stated that their children were never hungry at any time during the year because they could not afford food.

Eighty-two percent of poor adults reported never being hungry at any time in the prior year due to lack of money for food.

Other government surveys show that the average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children and is well above recommended norms in most cases.

Only 9.5 percent of the poor live in mobile homes or trailers, 49.5 percent live in separate single-family houses or townhouses, and 40 percent live in apartments

42 percent of poor households actually own their own home

The alarming statistics and inferences of the Stiglitz-disparity advocates attempt to portray Americans as being much worse off than the rest of the Western World, and this appears to be simply way off base.

Susan Bacon, neighbor and friend who has worked extensively in the skidrow community, says her hands-on experience isn’t always in sinc with all the national statistics we’ve quoted, but is bothered when some low-income families have a flat screen TV but cannot care for their children.

Since the word “poverty” carries such a negative connotation, we find ourselves surprised that poor people live as comfortably as they do. This doesn’t mean that they don’t want a better life or that society shouldn’t help them to achieve more. It also doesn’t mean there shouldn’t be safety nets so that we don’t find people starving in the streets. The only question is whether public and private policies are appropriate as safety nets as well as to support upward mobility.

Many in the Stiglitz arena seem to focus everything on the government’s social engineering as the solution. These have been tried and funded, to the tune of $21 trillion since President Johnson declared a “War on Poverty.” The outcome over 50 years, however, with regard to the number of poor families, remains about the same. Perhaps more of the same isn’t the solution.

A lot of poverty is being driven by personal behavior, not an unfair economic system. In 1963, just six percent of American babies were born out of wedlock. Now 41 percent are, and that includes 72 percent of African-American babies. Single-parent homes are four times more likely to be living in poverty; and children raised by single parents are three times more likely to end up in prison and 50 percent more likely to be poor as adults.

To sum it up, it’s not desirable to be poor, but the majority of the poor in the United States do not live in squalor as one might have imagined and actually live a better life than the middle class of a hundred years ago. This doesn’t mean they shouldn’t get some help. It does mean we should at least understand the problem as it truly exists.

Next month in Parts IV and V we’ll address what happened to the middle class and what, if any, are the consequences of all this disparity.

INCOME AND WEALTH DISPARITY (I&WD) PART II
THE UPROAR OVER EXECUTIVE PAY

As a follow up to our blog on December 4th, “A Conversation with Joseph Stiglitz,” this subject is such a vital part of our national debate and our escalating debt. Garry Wechter and I will present a few more posts on different aspects of this subject.

Here in Part II, we discuss the subject of the disparity of executive compensation. We hear a great deal lately about income inequality and the pay of CEO’s. Not only from Joseph Stiglitz who promotes this in his writings, but it’s difficult to read or watch the news without this topic being featured pretty regularly. It’s now a primary focus of what President Obama likes to pontificate about it since he’s struck out on just about everything else.

Average CEO compensation reported for the 500 biggest US companies in 2012 was $10.5 million (Forbes Executive Compensation Report), which works out to almost $6,000 per hour. Private industry worker salary and benefits averaged $31.16 per hour in September 2013 while workers in state and local governments averaged $42.51 per hour (the Bureau of Labor Statistics reported last December). The question de jour by many, including Stiglitz, is whether this is FAIR or good for America?…the insinuation being that CEO’s are unfairly paid too much.

At first glance some executives’ pay seems extraordinarily high, especially when it’s unrelated to performance. But let’s take a closer look.

For the movie Anger Management, Adam Sandler was paid $25 million plus 25% of the gross. That’s $37.5 million in the Sandman’s pocket (according to Celebrity Net Worth). Even Michael Jackson (deceased), The King of Pop, pulled in $145 million in 2012 (per Forbes). Baseball player Alex Rodriquez’s annual salary for 2013 was $29 million (per Wikipedia). Oprah is estimated to have earned $200 million in 2012 (per Forbes). We can go on and on, of course, but the question is why the comparison isn’t being made between these and other wealthy folks, rather than only comparing the workers to CEOs? We’ll focus on the power of the free market versus the president’s income redistribution efforts.

You see, redistributionists, like Joseph Stiglitz, do not seem to understand that the free market, for the most part, pays people what the free market thinks they’re worth. Union worker compensation distorts the process a bit as does government employment. But in the private sector, if the free market changes its mind regarding someone’s value, compensation will ultimately be adjusted. And, yes, there are often and always distortions, but in the end they are usually corrected and corrected more efficiently than any government policy could hope to achieve. Let’s give you some questions to ponder.

Should a doctor earn more than a bus driver? Should an auto mechanic earn more than a receptionist? Should a programmer earn more than a garbage collector? Should a prison guard earn more than a social worker? Or should there be a policy of income redistribution to level the compensation of all workers? Your answer to this question should also lead you to answer the income inequality question.

If you or someone in your family were sick, would you choose to go to a doctor who’s earning the same as a bus driver? Or might you worry about that? Do you imagine such a doctor would provide the quality of care you hope for? Both the doctor and bus driver provide a valuable service, but do you think that extra effort in time and education as well as dollars invested by the doctor is worth more compensation than that of a bus driver? If you don’t believe that, then you’re a true redistributionist and nothing said here will make any difference. If you agree that it’s reasonable for a doctor to earn more than a bus driver, then if you take that concept to its natural conclusion, you can’t really disagree with anyone’s free market compensation.

Is everyone’s pay FAIR? Absolutely not! Over time, is most free-market-determined compensation FAIR? For the most part, yes. Does Adam Sandler deserve to earn $37 million per movie? If the free market says he does, then we’d have to agree. Do CEOs deserve to earn multiple millions per year? If the free market says they do, then we have to agree.

Jealousy, envy, control and power are the negative forces that encourage and support the movement toward income redistribution. What Donald Trump or Warren Buffett earns has nothing to do with me or what you and I earn. Only what we do, how we behave, what we’ve learned impact our earnings. We Americans need to return to our roots in valuing hard work, perseverance, honesty and personal responsibility in all our endeavors and not worry about or covet what others are doing or earning. I think this would be a good lesson for many, including Joseph Stiglitz and the redistributionists, to follow today.

In Part III next week we’ll discuss the facts and misconceptions about poverty here in America.

Most of the critics have a different view, but I thought 2013 wasn’t a great year for movies. Here are a few that stood out for me as deserving “The Best” designation as well as a few others.

The Sapphires – A delightful romp based on the story of three aboriginal sisters from Australia who sang and entertained the troops in southeast Asia during World War II. A fun flick with no conflicts and no crisis. A real sleeper.

Lee Daniels, The Butler – Forrest Whitaker headed up a great cast with Oprah Winfrey to tell the mostly true story of the butler to seven presidents. Had a lot of great cameo appearances by top actors, like Jane Fonda doing Nancy Reagan. It tracked the butler’s career alongside the evolving civil rights movement.

Enough Said with Julia Louis Dreyfus and James Gondolfini as two estranged singles who happen by chance to find a common thread and live through some trials and tribulations. Good cast. Very well done.

Gravity – Excellent film. A tour de force for Sandra Bullock with an assist from George Clooney. It’s a gripping story of an astronaut on a troubled mission. The music heightens the tension as you follow Dr. Ryan’s (Bullocks’) trials through space. A definite academy award nomination. I wish I knew how they filmed this great combo of acting and technical. My vote doesn’t count but I would pick this for the Oscar.

Last year we picked seven as outstanding.

Then there were some flicks that were good, although not outstanding.

The Jackie Robinson Story – No awards, but a great flick for anyone who grew up in the 50’s. It was very emotional and brought back a lot of memories. Well done for what it was.

Capt. Phillipe – Tom Hanks is at his usual top of the game acting in this tension-building account of a true story. Even when you know the outcome, you get pretty nervous as the drama builds. It’s first class storytelling at its best.

Dallas Buyers Club – Not the most uplifting movie, but exceptionally well done reprise of a sort of true story about the struggle to find effective medicines in the early days of HIV/AIDS. The acting by Mathew McConaughey who lost 40 pounds for the role and Jared Leto are outstanding.

Nebraska – If you saw the trailer, you saw the heart of this movie starring Bruce Dern in a standout performance. The best parts of the flick were his quirky wife and the older relatives. Some funny lines along with the frailties of declining age.

The Past – From the Iranian director Asghar Farhadi who gave us the outstanding “A Separation” a few years ago. This too is a well done flick with French subtitles. A quiet gem that plays well.

Philomena – You can’t beat Judy Dench for another outstanding performance in a mostly true and somewhat sad story of the Catholic church in Ireland hiding a son from an unwed mother’s desire to reconnect.

Saving Mr. Banks – You know Tom Hanks will always deliver and Emma Thompson is outstanding as the creator of Mary Poppins. No need to say more. A little long, but you’ll enjoy it.

Quirkiest Film of the Year

Inside Llewlyn Davis – Another Coen brothers’ exercise in exploiting the also-rans and super quirks in our culture. The Coen brothers always offer a different kind of entertainment. This one is about the folk rock scene of the early fifties.

Most Overrated

American Hustle – Besides a first-rate performance from Jennifer Lawrence, this flick defies all the high ratings and early awards as a somewhat confusing scam with the audience being hustled.

Most Disappointing

Blue Jasmine – Outstanding performance by Kate Winslet as a sad, unraveling, single. It just wasn’t a Woody Allen movie. At least the kind of movie we’re used to from Woody.

Obamacare, the Affordable Care Act (ACA), is finally here. If you think the disastrous rollout to get here was an unbelievable exercise in incompetence (a billion dollars and a website that still needs help), wait ‘til you see the problems with the way the ACA works.

For most people outside of Medicare, the ACA will:*

Raise taxes and premiums (47% higher on average according to the Wall Street Journal), and raises in co-pays and deductibles in order to pay for coverage of pre-existing conditions.

Create a shortage of doctors, as well as longer waits to see doctors. All the new insureds will want to see doctors and a number of doctors will opt out because of lower reimbursements.

When all the exemptions and postponements are over in 2015, the enormity of the shortcomings will be even more clear to everyone.

Obama lied over and over when he said, “If you like your doctor and/or hospital you can keep them.” You can’t.

When he called the old plans “substandard” and need to be canceled, he didn’t mean from the perspective of consumers who bought them. He meant those plans were not designed to serve his goals of social equity and redistribution.

The entire ACA will run the risk of total collapse as not enough young, healthy people will sign on to balance off the older, sicker people.

To try and prop up this ACA debacle, Obama will increase the national debt to probably 20 trillion dollars before he leaves office. The national debt is now 17 trillion and during this two terms he will have irresponsibly created over 10 trillion dollars in debt.

*Medicare has only minor changes by comparison, like No. 2 above.

After all this turmoil, the easiest, cheapest health care plan was right in front of us. Here it is:

THE REALLY BEST HEALTH CARE PLAN

You’re a sick senior citizen and the government says there is no nursing home available to you. So what do you do?

Our plan gives anyone 65 years or older a gun and four bullets. With the gun, you are allowed to shoot four politicians.

Of course, this means you will be sent to prison where you will get three meals a day, a roof over your head, central heating, air conditioning, and all the health care you need.

Need new teeth? No problem. Need glasses? That’s great. Need new hips, knees, kidneys, lungs or heart? They are all covered…and probably even a sex change operation.

As an added bonus, your kids can come and visit you as often as they do now.

And who will be paying for all this? It’s the same government that just told you they cannot afford for you to go into a home.

And you get rid of four useless politicians while you are at it.

Plus, because you are a prisoner, you don’t have to pay any income taxes any more.

How hard are you willing to work and what price are you willing to pay in order to achieve success?

The past is history. The future is a mystery. The present is a gift to savor and enjoy.

The best way to predict the future is to create it.

Success is not forever and failure isn’t fatal.

An optimist believes we live in the best of all worlds. The pessimist fears this is true.

When two people in business always agree, one of them may be unnecessary.

The future ain’t what it used to be.

In the next month…

Take time to work, it is the price of success.

Take time to think, it is the source of power.

Take time to play, it is the secret of perpetual youth.

Take time to read, it is the foundation of wisdom.

Take time to love and be loved, it is the privilege of the gods.

Take time to share, life is too short to be selfish.

Take time to laugh, laughter is the music of the soul.

And one final thought: Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death.

It doesn’t matter whether you’re a lion or a gazelle. When the sun comes up you’d better be running.

I hope 2014 will be a super year filled with good health and happiness, as well as continuing success in all your endeavors.